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Insurance Law and Regulation Update - Regulatory

The ban on financial services firms using pre-ticked boxes and other opt-out methods of selling additional 'add-ons' with purchases of regulated financial products came into force on 1 April 2016(see PS15/22).

The non-Handbook guidance contained in Appendix 2 to PS15/22 also came into immediate effect on publication of the policy statement (28 September 2015).

Senior Insurance Managers Regime (SIMR)

The Senior Insurance Manager’s Regime is in force from 7 March 2016. The deadline for firms to submit their “Scope of Responsibilities” is Wednesday 7 September 2016.

Insurance Fraud Taskforce

The Insurance Fraud Taskforce published its report in January 2016 following a year-long investigation into the causes of fraudulent behaviour and has produced recommendations to reduce the level of insurance-related fraud.

The Taskforce produced a list of 26 recommendations. These include the following:

to improve consumer understanding of insurance products;

to ensure anti-fraud messaging is targeted and hard-hitting; and

to encourage the insurance industry to strive to improve the quality and quantity of data available in fraud databases and data sharing schemes.

On 26 May 2016, the Economic Secretary to the Treasury, Harriet Baldwin, announced that the Government accepts the recommendations contained in the report and will set out a process for implementing them in due course.

Principals and their appointed representatives in the general insurance sector

On 22 July 2016, the FCA published a thematic review entitled ‘Principals and their appointed representatives in the general insurance sector’ (TR16/6).

The FCA findings may be categorised into three main areas:

Business models and risk management

The FCA considered principals’ business models / risk management frameworks and found that almost half of the principals in the sample could not adequately demonstrate they were fully aware of the full extent of the risks arising from the activities of their AR.

Governance and oversight

When considering the appointment of ARs, the FCA found that a number of principals in the sample were not able to adequately demonstrate that they had met their obligations to consider the solvency and suitability of the AR, the impact on their own compliance with threshold conditions, or the adequacy of their own controls and monitoring resources.

Customer outcomes

The FCA raised concerns about the ability of principals to ensure that customers were adequately protected (having regard to the requirements of PRIN and ICOBS).

Increasing transparency and engagement at renewal in general insurance markets

On 10 August 2016, the FCA published PS16/21: “Increasing transparency and engagement at renewal in general insurance markets”.

The statement sought to report on the main issues arising from Consultation Paper 15/41, which attempted to address concerns about levels of consumer engagement and the treatment of consumers by firms at renewal, and the lack of competition resulting from this.

It also set out the FCA’s final rules in this area, which included guidance on ensuring customers:

are provided with appropriate information and communications;

have sufficient awareness regarding options on renewal (including switching and cancelling); and

are able to evidence their compliance with the FCA’s principles and any applicable fees and charges customers are obliged to pay.

On 16 August 2016, the FCA published a statement announcing that it has written to firms in relation to its consultation paper on its review of client money rules for insurance intermediaries (CP12/20).

It believes that the industry has increased its focus on protecting client money. In addition, the FCA states that a number of initiatives have taken place, which are leading to improvements. These include:

An enhanced pro-active CASS supervision strategy for general insurance intermediaries.

An updated reporting requirement applicable to general insurance intermediaries holding client money, which is enabling the FCA to collect more robust information from these firms.

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